Feb. 16 (Bloomberg) -- The elderly and disabled enrolled in
Medicare will pay less for drugs next year and insurers that
offer plans with extra benefits will see taxpayer subsidies
reduced because of record low spending growth, the U.S. said.

The standard deductible for Medicare’s drug program, called
Part D, will be $310 in 2014, about 4.6 percent less than this
year, the Centers for Medicare and Medicaid Services said in a
statement. Copayments also will be reduced for the program that
began in 2006.

It’s the first time Medicare recipients have received an
annual reduction in out-of-pocket costs for drugs, the
government said. “Historically low growth” in health-care
spending for the nation’s 50 million Medicare beneficiaries also
led to a 2.2 percent reduction in government payments next year
to Medicare Advantage plans offered by companies including
UnitedHealth Group Inc., the biggest U.S. health insurer.

People enrolled in Medicare will see “a direct and
positive impact on their pocket books,” Ron Pollack, executive
director of Families USA, a health-consumer advocacy group in
Washington, said in a telephone interview. “In the long term,
it means that some of the dire concerns about the future
sustainability of Medicare are somewhat relieved, and that will
probably reduce the inclination to shift greater cost burdens on
Medicare beneficiaries as part of future budget deliberations.”

The Congressional Budget Office said Feb. 5 that Medicare
spending grew in 2012 at its slowest rate in more than a decade.
Costs rose 3 percent, or about $16 billion, and will increase
about 4 percent this year, the agency said.

Slowing Costs

There’s no consensus on why health-care cost growth has
slowed, Pollack said. One culprit may be the recession from 2007
to 2009, while President Barack Obama has credited the 2010
health-care overhaul he signed, the Affordable Care Act.

“The Affordable Care Act helps us strengthen Medicare
Advantage and Part D,” Jonathan Blum, deputy administrator of
the agency, said yesterday in his agency’s statement. “We are
working to ensure that people with Medicare have affordable
access to health and drug plans, while making certain that plans
are providing value to Medicare and taxpayers.”

About one-quarter of Medicare’s participants choose
Advantage plans, which provide extra benefits such as fitness
programs and eye glasses compared with the traditional program.
Minnetonka, Minnesota-based UnitedHealth has more Advantage
customers than any other company, according to Bloomberg
Industries.

Reviewing Proposal

Robert Zirkelbach, a spokesman for America’s Health
Insurance Plans, the Washington lobby group that represents
UnitedHealth and other insurers, said in an e-mail that his
group was reviewing Medicare’s announcement and declined to
comment further.

The government’s payment reduction to private insurers for
the Advantage plans is higher than an estimate by Matthew
Borsch, an analyst with Goldman Sachs Group Inc. Borsch in a
note to clients before the announcement yesterday estimated the
rate change would range from a 1 percent increase to a 1 percent
reduction.

The extra benefits in the Advantage plans are worth an
estimated $900 a year for beneficiaries, Borsch said.

The reduction in cost-sharing for Medicare drug programs,
which are often included in Advantage plans, is probably due in
part to increased use of generic drugs, said Ariel Gonzalez,
director of family health and federal advocacy for AARP, the
lobby group for people ages 50 and older.

“Lower priced generics are key,” he said in an e-mail
sent by a spokeswoman for the group.

Charles Cote, a spokesman for the Pharmaceutical Care
Management Association, which represents companies such as
Express Scripts Holding Co. that administer Medicare drug plans,
said his industry’s work has also helped.

The companies “are continuing to lower costs for both
patients and public programs,” he said in an e-mail.